AstraZeneca (LSE: AZN) has proved to be a welcome oasis in a sea of red this year. Whilst the broader FTSE 100 has fallen by double-digit percentages in 2018 the pharmaceuticals manufacturer has seen its share price rise 15%. And I believe further big gains could be in store for 2019.
Good news
A steady stream of positive trading updates has driven AstraZeneca’s ascent this year, although in more recent weeks it could be argued that its leading position in the defensive healthcare sector has encouraged waves of rampant buying.
Macroeconomic concerns related to Brexit, US-Chinese trade wars, and fears over Federal Reserve monetary tightening have all been oscillating in the past few months. With these issues unresolved and threatening to run well into 2019 it’s quite possible that safe-haven demand for AstraZeneca could continue to soar.
But let’s return to that raft of strong trading statements. It’s a run that has seen the company’s stock price strike record high after record high since the middle of summer, igniting hopes that the crushing patent expirations stretching back many years are no longer a stifling shadow.
Look, AstraZeneca still faces huge revenues hits related to exclusivity lapses on some of its key labels. Asthma-battler Symebicort, for example, which remains the company’s top-selling drug and accounts for 13% of group sales, saw sales drop by almost a tenth (at constant exchange rates, or CER) in the nine months to September as competitive pressures increased.
That said, though, news flow from the Footsie firm this year has underlined the brilliant progress that its R&D teams has made in reinvigorating the product pipeline in recent times. And with this, hopes that AstraZeneca can finally return to sustained profits growth have risen.
Great growth, big income
Sales of new medicines boomed 86% CER between January and September, according to November’s most-recent release, a figure that has vindicated AstraZeneca’s focus on fast-growing therapy areas oncology, respiratory, and the overlapping diseases within the cardiovascular, renal and metabolism (or CVRM) arena.
Revenues from blockbuster cancer drug Tatgrisso leapt 91% CER in the nine-month period to $1.27bn, for example, and the momentum has continued in recent months with revenues rising 105% CER in quarter three. Turnover generated from its other oncology heavyweight Lynparza boomed 118% CER from January to September, to $438m, while elsewhere its sales of its diabetes fighter Farxiga leapt 32% year-on-year to $994m.
A flow of encouraging testing and regulatory releases throughout 2018 have lent strength to predictions that its pipeline of new medicines can continue to push the top line higher after many years of famine. And particularly so as sales to increasingly-wealthy emerging markets are going to strength to strength; these rose 16% CER in the nine months to September, driven by demand from China where comparable sales grew by more than a quarter year-on-year.
City analysts certainly believe that AstraZeneca is well on the road to recovery, a 10% earnings rise forecast for 2019. And this supports predictions of another chubby dividend of 280 US cents per share, a projection that yields an inflation beating 3.7%. In my opinion AstraZeneca’s a great share to stock up on for the New Year, and one that I am convinced can deliver knockout shareholder returns in the years ahead.
